FTC Challenges Hospira/Mayne Pharma Deal

To Protect Competition, Companies Must Sell Assets for Five Generic Injectable Drugs

The Federal Trade Commission today announced its challenge to Hospira Inc.’s (Hospira) proposed $2 billion acquisition of rival drug manufacturer Mayne Pharma Ltd. (Mayne), along with an agreement and order requiring the companies to sell assets used to manufacture and supply five generic injectable pharmaceuticals in order for the transaction to proceed. Absent relief, the FTC that charged the deal would violate U.S. competition laws.

In settling the Commission’s charges, the companies have agreed to divest to Barr Pharmaceuticals, Inc. (Barr), within 10 days of the acquisition, Mayne’s rights and assets related to the following products: hydromorphone hydrochloride (hydromorphone), nalbuphine hydrochloride (nalbuphine), morphine sulfate (morphine), preservative-free morphine, and deferoxamine mesylate (deferoxamine).

“Just as with generic oral pharmaceutical products, consumers benefit from robust competition in the markets for generic injectable drugs,” said Jeffrey Schmidt, Director of the FTC’s Bureau of Competition. “The order requiring the divestiture of the five drugs to Barr will preserve competition in these vital markets and prevent consumers from paying higher prices.”

The Relevant Products: Each of the products that will be divested to Barr is described below.

Hydromorphone Hydrochloride. Injectable hydromorphone is a narcotic opioid analgesic used to relieve moderate-to-severe pain, both acute and chronic. The branded product, Dilaudid H-P, is made and sold by Abbott Laboratories, Inc. Only three companies compete in the U.S. market for the generic version of the drug: Hospira, Baxter Healthcare Corp. (Baxter), and Mayne.

Nalbuphine Hydrochloride. Nalbuphine is an injectable opioid analgesic also used to relieve moderate-to-severe pain. Hospira currently is the only supplier of the generic injectable form of the drug in the United States. However, Mayne is in the process of entering the market, and one of a limited number of firms that could enter in the near future. The proposed acquisition likely would eliminate Mayne as a future competitor.

Morphine Sulfate. Injectable morphine is a widely used opioid analgesic used to relieve moderate-to-severe pain. Hospira is a leading producer of the generic injectable form of the drug. Baxter and Amphastar Pharmaceuticals, Inc. are the only other suppliers of generic injectable morphine in the United States. As with nalbuphine, Mayne is in the process of entering this market, and one of a limited number of firms that could enter in the near future. The proposed transaction likely would eliminate Mayne as a potential competitor.

Preservative-free Morphine. Injectable preservative-free morphine, unlike injectable morphine, is typically used when the drug is delivered into the spinal column. Currently, only Hospira and Baxter sell this drug in the United States as generic suppliers. Mayne is in the process of entering the market, and one of a limited number of firms that could enter in the near future. The proposed transaction likely would eliminate Mayne as a potential competitor.

Deferoxamine Mesylate. Injectable deferoxamine is an iron chelator used to treat acute iron poisoning or chronic iron overload. Hospira and Teva Pharmaceuticals Ltd. are the only suppliers of this generic injectable product in the United States. Mayne is in the process of entering this market, and one of a limited number of firms that could enter in the near future. The proposed acquisition likely would eliminate Mayne as a potential competitor.

Oral drugs are not close substitutes for these generic injectable drugs because the latter are used when a patient is unable to ingest pills or capsules or when an immediate onset of the drug is needed and the patient cannot wait for pills or capsules to take effect. In addition, entry into the relevant markets would not be timely, likely, or sufficient to counteract the anticompetitive impacts of the acquisition.

The FTC’s Complaint: According to the Commission’s complaint, the acquisition as proposed violates Section 7 of the Clayton Act and Section 5 of the FTC Act because it would be likely to cause significant competitive harm to U.S. consumers in the market for each of the five injectable drugs described above. There currently are a small number of suppliers for each of these products in the U.S. market. Given the small number of suppliers for each of these products, the prices of the relevant products decrease with the entry of each additional competitor. With a decrease in the number of existing or future competitors in these markets, anticompetitive effects – either unilateral or coordinated – are likely. The complaint alleges that the proposed acquisition would cause significant harm to consumers by eliminating actual or potential competition between Hospira and Mayne in the markets for each of the five drugs. The specific alleged impacts in each of the five markets are detailed in the Commission’s analysis to aid public comment that can be found as a link to this press release on the FTC’s Web site.

The Consent Order: The FTC’s consent order is designed to remedy the competitive harm resulting from Hospira’s acquisition of Mayne. Under its terms, the companies are required to divest certain rights and assets related to each of the five relevant products within 10 days of the acquisition. Specifically, the order requires Hospira and Mayne to divest the assets referenced above to Barr Laboratories, a large generic injectable pharmaceutical manufacturer. According to the FTC, following its recent acquisition of Pliva d.d., Barr markets several injectable drug products in the United States, has multiple established manufacturing facilities, an established sales organization, a robust product pipeline, and experience gaining the necessary regulatory drug clearances. In addition, Barr’s acquisition will not raise competitive issues in the relevant markets, as it does not currently compete in those markets. Accordingly, Barr is well-positioned to replicate the competition that would have been lost by the transaction as proposed.

If the FTC determines that Barr is not an acceptable acquirer of the divested assets, or that the manner of the sale to Barr is unacceptable, Hospira and Mayne would be required to undo the sale and sell the assets to another Commission-approved buyer within six months. If they are unable to do so, the order would allow the FTC to appoint a trustee to oversee the assets’ sale.

Other Terms of the Order: The consent order contains other provisions to ensure that the divestitures are successful. First, it requires Hospira and Mayne to provide transitional services to enable Barr or another acquirer to obtain all of the FDA approvals necessary to produce and market the assets purchased. Such services include transfer technology assistance to manufacture the products in the same manner, and of the same quality, as by Hospira and Mayne. In addition, the FTC has appointed R. Owen Richards of Quantic Regulatory Services, LLC, to oversee the asset transfer and ensure Hospira and Mayne comply with the terms of the consent order. Finally, the order requires Hospira and Mayne to file regular reports with the Commission until the divestitures and transfers are completed.

The Commission vote to approve the consent order and place a copy on the public record was 5-0. The FTC will be accepting comments on the order for 30 days, until February 20, 2007, after which it will decide whether to make it final. Comments should be sent to FTC, Office of the Secretary, 600 Pennsylvania Ave., N.W., Washington, DC 20580.

NOTE: A consent agreement is for settlement purposes only and does not constitute an admission of a law violation. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of $11,000.

Copies of the complaint, consent order, and an analysis to aid public comment are available from the FTC’s Web site at http://www.ftc.gov and also from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC’s Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the laws that the Bureau enforces, the Commission has published “Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws,” which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.